A cryptocurrency wallet is a digital wallet used to store cryptocurrencies. It stores public and private keys which are used while transacting the cryptocurrencies. Cryptocurrency wallets consist of public and private keys. Public keys are like your account number where you can share it with anyone who wants to send you cryptocurrencies. Private keys are like your pin number which is used while spending or withdrawing the cryptocurrency from your wallet.
This beginner’s guide shows you what is a cryptocurrency wallet and its types. Cryptocurrency wallets are classified into 3 types depending upon how we store it. They are
- Paper Wallets
- Software Wallets
- Hardware Wallets
- Paper Wallets
As the name suggests, if we store the cryptocurrencies in the software, they are called software wallets. Depending upon the cryptocurrency you have, you can choose to install the software wallets on your desktop computers or mobile phones or online. In case of desktop wallet, we can only be able to use it from a single system where the wallet is installed. This is secure but doesn’t offer higher levels of security. If a hacker gains access to your computer, there’s nothing you can do to reverse the transaction. The same happens for mobile and online wallets. The cryptocurrency is secure in the online wallet until hackers access it.
To prevent the hack from happening, you should keep in mind all the security warnings and exercise caution while using software wallets. Also, you should patch the software wallets with the latest security updates as soon as it is downloaded.
Keeping the cryptocurrencies in hardware such as USB devices is called hardware wallets. Like you carry data in a USB pen drive and use it on the go just while plugging in, hardware wallets gives you an advantage of carrying your cryptocurrency offline and just using it online when needed. To spend or withdraw a cryptocurrency, you must go online and this is what a hardware wallet is offering. Just plug in the USB hardware wallet and spend your cryptocurrency.
You should keep in mind the following factors before using cryptocurrency wallets.
- You cannot recover the lost private keys (so keep the private key in a secure location)
- You cannot reverse a transaction (keeping the private key secure is the solution)
- You and only you are responsible for the security of your cryptocurrency wallet
- If you enter your private key on a phishing site, your funds will be gone (Transfer the funds as soon as you realize that the phishing site conned you)
So, are you ready to store some in your cryptocurrency wallet?